To be honest I don't know the time frame to be applied to the term in the long run, but my guess is 3 to 5 years. But the central idea is indeed that ounce the turbulence in the financial markets dissipates one can expect the gold price to settle around that mark, even if the economic crises has not yet be solved.
One has to remember that there are two aspects to this crises, namely the financial and its aftermath, the economic. The financial is about who is going to pay, the bankers or the people, while the economic is about how to close the output gap (the difference between what could be produced and what it is being actually produced).
In America the financial question has already been answered so the attention has shifted to the question of how to kickstart the economy and to my understanding on this regard two possibilities have already been eliminated, namely more deficit spending and inflation targeting by the Fed (printing money until inflation expectations become intrenched).
In Europe it seems that the reverse is happening. As far as the output gap is concerned the answered given by the Europeans was a large those of supply side economics: tighten the money supply, cut government spending, and focus on increasing labor productivity while the financial crises is still unresolved. As a matter of fact, the only thing that I know is that Angela Merkel still thinks that she can reconcile the interests of the bankers with those of the people.
FML Price at posting:
6.8¢ Sentiment: Hold Disclosure: Held
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